A month has gone by since the last earnings report for Marriott Vacations Worldwide (
VAC Quick Quote VAC - Free Report) . Shares have added about 22.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marriott due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Marriott Vacations Q3 Earnings Miss Estimates, Fall Y/Y
Marriott Vacations reported mixed results for third-quarter 2020, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. However, both top and bottom lines declined year over year due to the ongoing pandemic.
Q3 Earnings and Revenues
In the quarter under review, adjusted loss per share came in at 81 cents, wider than the Zacks Consensus Estimate of a loss of 60 cents. In the prior-year quarter, the company reported adjusted earnings of $1.97 per share.
Total revenues of $649 million beat the consensus mark of $609 million by 6.6%. However, the top line declined 39.1% on a year-over-year basis. Segmental Performances Vacation Ownership: During the third quarter, the segment’s revenues declined 39.3% year over year to $571 million compared with $940 million in the prior-year quarter. The decline can be primarily attributed to lower resort occupancies resulting from the coronavirus pandemic. Revenues, excluding cost reimbursements, fell 56% year over year due to a 9% decline in financing revenues, partially offset by 4% growth in management fees.The segment’s adjusted EBITDA came in at $28 million compared with $195 million in the prior-year quarter. Exchange & Third-Party Management: The segment’s revenues totaled $71 million in the third quarter, down 36% from $111 million in the prior-year quarter. The decline can be primarily attributed to lower exchange and rental transactions due to the impact of the coronavirus pandemic. During the third quarter, total Interval Network active members declined 2% (compared with the previous quarter) to 1.5 million, while interval International average revenue per member fell 10% to $36.76. The segment’s adjusted EBITDA declined 31.1% year over year to $31 million. Corporate and Other results
General and administrative costs improved $25 million year over year, courtesy of synergy savings and a decline in compensation-related expenses. It also included $5 million of credit under the CARES Act legislation, thereby motivating the company to pay associates' benefit costs while not working.
Expenses & EBITDA
Total expenses in the quarter declined 32.4% year over year to $673 million compared with $996 million reported in the year-ago quarter.
The company’s adjusted EBITDA in the third quarter came in at $35 million compared with $190 million reported in the year-ago quarter. Balance Sheet
As of Sep 30, 2020, cash and cash equivalents were $660 million compared with $287 million as of Dec 31, 2019. The company had $4.4 billion in debt outstanding (net of unamortized debt issuance costs) at the end of the third quarter, up $0.3 billion from 2019-end. This includes $2.7 billion of corporate debt and $1.8 billion of non-recourse debt related to its securitized notes receivable.
Owing to the uncertainty tied to the pandemic, the company has temporarily suspended its share repurchases and dividend payouts. Operational Update
As of Sep 30, 2020, most of the company's sales centers under the Vacation Ownership business remained open. The company said that 93% of its resorts were reopened in its Interval International business. Additionally, the company resumed sales at its Hawaiian sales centers in mid-October.
On Sep 10, the company approved a workforce reduction plan, which is likely to affect approximately 3,000 associates. With respect to this, the company stated that it now expects approximately $25-$30 million in restructuring and related charges, primarily related to employee severance and benefit costs. How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -147.62% due to these changes.
Currently, Marriott has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Marriott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.